SA’s glimmer of economic hope: The Herald

Stamping out uncertainty, ending state bailouts can win confidence of investors, professor says

New, flexible thinking is needed to find a better answer

IF South Africa’s economy is to be saved from the uncertainty that is discouraging investors, government leaders need to realign their priorities and stop pouring money into failing state-owned enterprises.

This is according to Professor Raymond Parsons, from the North-West University School of Business and Governance.

Parsons was speaking to academics, business leaders and stakeholders yesterday at the Nelson Mandela University (NMU) Business School, where he is also an honorary professor.

“We need to rebuild confidence and appoint leaders who can win back the confidence of investors,” Parsons said.

“The government’s numbers are not looking good. A lot of the [financial] stress is coming from the persistence to bail out state-owned enterprises.

“New, flexible thinking is needed to find a better answer than transferring money from a profit-making investment to a loss-making investment.”

While policy uncertainty, which includes the tax regime, monetary and fiscal policy and political dynamics, is a constant refrain in South Africa’s economy, it limits business investment, he said.

“You can insure against risk, but not against uncertainty, which increases volatility, reduces output and even jobs,” Parsons said.

“Businesspeople often delay spending until the uncertainty is resolved, because they don’t know where the chips may fall.

“High levels of uncertainty are simply bad for consumption.”

Parsons still had some hope for the country’s economic outlook.

“We are in a technical recession as we’ve had two successive quarters of negative growth, but I think we will get out of it,” he said.

“We will be very lucky if we can get 0.5% of positive growth for the year, but [at the same time] Finance Minister Malusi Gigaba’s 14-point plan is a huge step forward.

“It is a stabilisation plan rather than a growth plan, but it is the first time deadlines have been set.

“His plan was criticised, which told me something about the mood of analysts: the level of confidence [in the country] has sunk so low that he was given no credence.

“Until the next ANC conference in December, we must [learn to] see uncertainty as the new normal in South Africa.”

“As a practical example, the uncertainty around the new Mining Charter will have a local impact,” he said.

“About 8 000 workers might be retrenched, and a high percentage of miners are from the Eastern Cape, which will add to our already high unemployment rate.” — Odette Parfitt parfitto@tisoblackstar.co.za